Rethinking Annual Deductibles: The Case For Monthly Cost-Sharing Limits

“A key contributor to underinsurance is growing enrollment in high-deductible health plans for those on the health insurance exchanges and in employer-sponsored health plans. Solutions such as consumer education, health savings accounts, and targeted cost-sharing reductions have been explored to help alleviate concerns of cost-related non-adherence to needed medical care, yet one-third of privately insured Americans report difficulty affording health care.

[..] Given high health care prices, increasing deductibles (the average annual deductible in employer-sponsored insurance increased from $533 in 2009 to $1,655 in 2019), and growing high-deductible health plan enrollment (from 25.3 percent in 2010 to 47.0 percent in 2018), it is clear why affordability remains a challenge. Furthermore, deductibles are higher in companies with a larger share of lower-wage workers than in companies with a larger share of higher-wage workers.

[..] Out-of-pocket costs for either in-network only or both in- and out-of-network care could be capped under a shift from annual to monthly cost-sharing limits, reducing out-of-pocket costs for enrollees to more manageable levels in any given month. To be sure, this would shift some costs back to insurers, and more affordable care could lead to increases in so-called inefficient health care use, commonly referred to as moral hazard. However, we believe this risk would actually be lower under a monthly cap compared to an annual cap: There is a practical limit to the amount of care that can be scheduled within one month. Conversely, under the current annual cost-sharing limits, patients who reach their out-of-pocket maximum quickly have the opportunity to use care with no cost sharing for a substantial portion of the year.

[..] Patients with acute illnesses could get necessary care without staring down a deductible that is more than their monthly take-home pay, and those with chronic needs would be better able to spread their costs throughout the year instead of being hit with one large bill at the beginning of every year.

Monthly limits would also smooth the barriers for people who enroll mid-year due to a job change or other qualifying life event. Patients would face the same cost sharing month after month regardless of when they enrolled, meaning they would not be tempted to wait until the deductible resets in January before getting any necessary care. Those who want to switch jobs or go back to school would not have to worry about losing the progress made on their deductible for the year.

[..] Unless monthly cost-sharing limits were paired with substantial reforms to health care costs, such as all-payer rate setting, they would simply just shift costs back to insurers in the short term, leading to even higher premium growth in the long term.”

Full post, Shafer P, Horny M and Dusetzina S. Health Affairs blog 2020.10.16